Buy-to-let mortgage calculator
Property
Lender criteria
- Limit by LTV
- £150,000
- Limit by rent
- £192,000
- Deposit needed
- £50,000
- Interest / month
- £600
- Cash flow / month
- £280
- Gross yield
- 6.6%
Example figures, interest-only, before Stamp Duty and fees.
Learn how to fund your portfolio →Buy-to-let and finance questions
On interest-only, the monthly payment is the loan multiplied by the interest rate, divided by 12. A £150,000 loan at 4.9% costs £613 a month. On repayment, the payment also pays off part of the loan each month, using the standard mortgage formula over the full term, so the same loan over 25 years costs about £868 a month. Any arrangement fee added to the loan is included.
Lenders check two limits and lend the lower one. The first is loan to value, usually up to 75% of the property’s value. The second is rental cover: the rent must cover the monthly interest by 125% to 160%, worked out at a stress rate. The calculator shows both figures for your property.
The interest cover ratio (ICR) compares the monthly rent with the monthly interest at the lender’s stress rate. At 125% cover, £1,250 of rent supports £1,000 of stressed interest. Higher and additional-rate taxpayers borrowing in their own name are usually tested at 145%, and HMOs at 145% to 160%. Fixes under five years are stressed at the higher of 5.5% or the pay rate plus 2%, while five-year fixes can be tested at the pay rate.
Usually at least 25% of the purchase price. Some lenders go to 80% loan to value, a 20% deposit, but rates are higher and the rental cover test is harder to pass. You will also need cash for stamp duty, legal and survey fees, and any refurbishment.
Interest-only gives a lower monthly payment and stronger cash flow, which is why most landlords use it, but the whole loan is still owed at the end of the term. Repayment costs more each month and clears the debt. The right choice depends on your cash flow, your plan for repaying the loan and your wider portfolio, so talk it through with a broker or adviser.
- Yield areas versus growth areas
- Property types lenders and tenants want
- Running the numbers before you view
- Loan-to-value, interest cover ratios and stress rates
- Fixed, tracker and interest-only products
- First-time landlord criteria and getting the best from a broker
- How Section 24 affects individual landlords
- SPV limited companies and how lenders treat them
- Stamp Duty, including the rate for additional homes
